SANTA ANA, Calif. – A federal judge Monday rejected a plea deal that had called for Broadcom Corp. co-founder and Anaheim Ducks owner Henry Samueli to get probation rather than prison for his role in a stock options backdating case that led to the largest corporate writedown of its kind.
U.S. District Court Judge Cormac Carney wrote that the deal calling for five years’ probation and US$12 million in payments by Samueli would erode the public’s trust in the judicial system.
“The court cannot accept a plea agreement that gives the impression that justice is for sale,” Carney wrote.
Samueli has pleaded guilty under the plea agreement to lying to investigators for the Securities and Exchange Commission. Broadcom, an Irvine, Calif.-based telecommunications chip maker, was ultimately forced to write down $2.2 billion in profits after the options backdating was uncovered.
Prosecutors and Samueli asked the judge for time to renegotiate their plea deal or to allow Samueli to withdraw from the agreement. Carney set another hearing for Sept. 29.
Samueli struck the plea deal with prosecutors this year in a larger criminal probe into stock-option backdating at Broadcom.
Backdating involves retroactively setting a stock option’s exercise price to a low point in the stock’s value, boosting the profits that are attained when the shares are sold.
It is legal when properly accounted for, but if companies fail to properly disclose the move, profits can be overstated and taxes underpaid.